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International expansion

If your business wants to create growth, it is only natural that it shifts focus towards new markets. However, in order to do so, you need a systematic approach: from primary strategic considerations to risk assessment and evaluation.

Acquire knowledge and draw up a plan

Reasons for international expansionWhen we talk to companies that have established themselves internationally, they give many reasons for their decision. Some are driven by a desire to create more growth; some want to acquire critical mass or economies of scale; others do so in order to make sure they stay relevant on their existing market.

The opportunities are many, and if your business is thinking about getting established abroad, it is a good idea to know which strategic priority is pushing you to do so. That way you can best identify the opportunities and challenges that could have an impact on whether you achieve your objectives.

The markets on which it is relevant for you to establish your business depend on its size, risk appetite and sector. Ideally, a market is selected based on an in-depth analysis of data in order to find the best possible match between what your business offers and the opportunities on the market.

Here it is relevant to look at both macro conditions (such as economic growth and political stability) and more sector-specific analyses.

Opportunities and threats

Things you should do:

Seek advice regarding local procedures and regulation

Identify expansion targets and make sure they are shared by the entire business

Consider potential challenges in relation to the local market and how to counteract them

Consider a variety of expansion strategies in order to select the one that best suits your business

Appoint employees with knowledge of the local market

Things you should avoid:

Entering a market without the necessary preparation

Underestimating cultural differences

Assuming that your product will automatically be as successful on the new market as it is at home

Once you select a market, your business has to consider which way into the market it should choose. Broadly speaking, there are three options: buying a business; building up a business from scratch; and entering into a partnership.

All three have their advantages and disadvantages. Buying a business can be a shortcut into the market and can provide synergies with your existing business. Setting up a subsidiary gives you full control and a better opportunity to preserve your business culture. A partnership, on the other hand, can offer flexibility and less risk.

These options should be considered and evaluated based on the opportunities available on the market and taking into account the strategy and economy of your business.

We can help you all the way

Get local advice on 12 markets

Know your currency risk and manage it

Optimise your cash flow across borders and currencies

Get industry and market analyses

Make payments easily

Maintain an overview of your consumption via Corporate Cards

Use leasing across the Nordic region

Plan procedures and identify stakeholdersIn order to put your business in the best position to succeed, you should think about the process and steps to be taken to set up a successful business in another country. In this context, you should also identify which stakeholders to include in the process.

This way you will give your business the best chance of success when expanding internationally, without any negative surprises in the process.

Get your company ready

Once your company has selected a market to focus on, it is a good idea to find out more about the market. This applies at both the national and industry levels. In relation to the country, it can be of great help if you can get in touch with other companies that have already established themselves on the market in question. That way you can avoid repeating others' mistakes.

In addition, you should strive to understand what your industry and the market are like in that country. What drives customers' behaviour and what is common practice on the market? You can acquire such information through analyses, reports or your network.

Opportunities and threats

Things you should do:

Seek advice regarding local procedures and regulation

Identify expansion targets and make sure they are shared by the entire business

Consider potential challenges in relation to the local market and how to counteract them

Consider a variety of expansion strategies in order to select the one that best suits your business

Appoint employees with knowledge of the local market

Things you should avoid:

Entering a market without the necessary preparation

Underestimating cultural differences

Assuming that your product will automatically be as successful on the new market as it is at home

Proceeding without having a Plan B

Underestimating the importance of proper integration

Familiarise yourself with local laws and regulationsOne area you definitely need to have a good grasp of is local laws and regulations. You should make sure that the way you intend to do business and your legal structure comply with the laws of the country into which you are expanding.

When operating on the local market, it is also essential that you know how protected your business is in the event of legal action. How long could it take to resolve disputes with local counterparties?

If you hire employees abroad, you must consider labour and employment laws in the country in question, including regulations and guidelines relating to employee pension terms. The same applies to income and corporation tax.

Finally, you should of course also ensure that you have the necessary permits to do business in the country. A good lawyer can assist you with all of this.

Entering a new market typically requires an investment – and it can be difficult to select the right capital structure. Debt financing means that the current ownership is not diluted, while equity financing can give start-ups more time and flexibility to get their business growing. We can advise you on how to find the best solution for your business.

We can help you all the way

Get local advice on 12 markets

Know your currency risk and manage it

Optimise your cash flow across borders and currencies

Get industry and market analyses

Make payments easily

Maintain an overview of your consumption via Corporate Cards

Use leasing across the Nordic region

Find a balanced team of employeesWhether you have chosen to buy a foreign business, build a business up from scratch or partner with a local business, you should consider how to ensure that your employees are best suited to handle this new task.

Here it is all about striking a balance between having skilled employees in your main office at home and on the local market. The perfect combination is usually local employees and transferees in the new part of the organisation. That way you get a good mix of experience on the local market and understanding of the parent company's business and strategy.

For the same reason, it can also make sense to transfer people from the local market to the main office and send someone to replace them. This ensures adequate knowledge-sharing.

Your business is moving abroad

Get the bank readyIt is typically an advantage for businesses to be with a bank that can offer local advice and a common platform across markets. When you establish your business on a new market, there are a number of bank-related questions you should be on top of:

- What is the payment structure like in the country in question?- Which employees will need a credit card?- Are the cash flows of the business optimal?- How should you manage liquidity?- How can you achieve interest rate optimisation and currency hedging?

We can help you with all of these things. We can also offer a single system that allows for liquidity management in real time across markets and currencies. Read more about Danske eBank here.

Integration of economy and administrationWhatever the answers to these questions may be, and regardless of the bank you use, the new organisation's finances and administration should be integrated with existing ones.

Here you must make a strategic assessment of which solution is right for your business. This depends on both the degree of control you want to have over the new organisation and how soon you want to implement integration. Nonetheless, you should decide on the level of integration and draft a plan for the integration process.

This should include processes (such as liquidity management and ERP systems) and employees (HR systems). Additional investments in employees or consultants will probably be necessary for a certain period. This is often a better investment than risking administration integration failure, which can be costly and time-consuming.

Be aware of cultural differencesEspecially when expanding into neighbouring markets, people tend to underestimate the cultural differences. This is a mistake that can cause unnecessary problems, but ones which are common among many businesses. Our customers tell us that they are surprised by the cultural differences they experience when they establish themselves in other countries, even within Scandinavia.

You can also experience bureaucratic differences when interacting with the local authorities. You should pay attention to all of this in order to minimise the risk of failure or extensive extra costs.

Not only do cultural differences have the potential to create curious and sometimes problematic situations, but they also represent an opportunity to learn other ways of doing things that may improve the way you do business every day. In particular, you will have the opportunity to benefit from this if you transfer employees from new markets to the main organisation for shorter or longer periods of time.

Organisational changesAlthough this will not necessarily be the case, you should consider whether international expansion will have consequences for the approach your organisation relies on. In some industries, for example, a new market influences the supply chain. Although this may not be the case, expansion provides a good opportunity to look at your existing organisation and consider whether it is still optimal.

Employee trainingMoving into a new market may mean having to upgrade the competence in your business. This can involve anything from bookkeeping training to language courses for sales managers. As far as the new part of the organisation is concerned, it is often appropriate to give a thorough introduction to the operations, processes, culture and history of your business.

All of this should be considered when expanding.

Evaluation and developmentNow is the time to carry out an evaluation. How is your international expansion going? Was it the right strategy, and were the assumptions you made in the business plan correct? What have you learned for possible further expansion?

We can help with benchmarking and constructive analysis, which point the way forward and provide suggestions for improvement.

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